Whether you are new to the real estate industry or a seasoned veteran, offers contingent on the sale of another home have likely not been on your radar the last few years. When the market was beyond competitive and most houses were getting multiple offers, asking a seller to take your offer contingent on the sale of your home was, well, out of the question. In this episode we are going to talk about what sellers need to look for when reviewing a contingent offer and why contingent offers aren’t inherently bad. With lots of move up buyers feeling stuck in their home and worried about not finding what they want, who could blame them for not blindly listing their home for sale and hoping for the best. Contingent offers can be a great tool for buyers and shouldn’t be immediately dismissed by sellers. We are going to give you all the tools you need as the listing agent to make sure your sellers make the right choice for them and respond confidently to all contingent offers!
Please revisit episode 65 if you are a buyer looking to buy and sell at the same time as we give all of the options and a step by step of that process!
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The following is a rough transcript provided by Otter.ai.
Alissa 0:02
Do I used to be nice?
Katy 0:04
Let me tell you a story.
Alissa 0:05
I’m not nice anymore. There were no red flags about the buyer no until until their home got under contract.
Katy 0:18
If you love something, set it free and if it comes back to you, it is yours. It doesn’t it never was. Your now babysitting to transaction Yes, you got to make sure your people are all doing the right thing and that those people are all doing the right thing.
Alissa 0:36
Hi, y’all welcome to hustle humbly. It’s Alyssa and Katie. And we are two top producing realtors in the Baton Rouge market.
Katy 0:42
We work for two different companies where we should be competitors. But we have chosen community over competition.
Alissa 0:47
The goal of our podcasts is to encourage you to find your own way in business to stop comparing
Katy 0:51
yourself and start embracing your strengths. have so many things to say right now. Hi, Alyssa. We’re
Alissa 0:58
recording this thing on it’s
Katy 1:02
Hi. Hi, welcome. How are you today? Just
Alissa 1:04
fine. Wonderful. We’re
Katy 1:06
on episode 218 contingencies. And I like when I just glanced over your page literally said, contingencies. Underline nothing else.
Alissa 1:16
Here’s my notes. You can see why
Katy 1:19
they’re all straight out of her head. Now I want you to show them after what it’s going to look like, oh, yeah, because it will get wild. The notebook will get wild. We have not done a nuts and bolts see how to episode in a minute. Or just dove deep into some component of a transaction? Yeah. So I’m kind of excited. Because I love talking about you know how these things go down. Did you say you looked up a definition for contingency?
Alissa 1:51
Yes. Before we started, I said, are we just talking about like if you have to buy or sell a house, buy or sell a house to buy a house and she said what other contingencies are there? I
Katy 2:03
mean, to be fair, I know that the word means other things. But locally,
Alissa 2:07
yes. If you get a contingent offer, we’re just Sturgis meaning the buyer has to sell a property. Yes. Okay. But I told Katie, when I get offers from people in other states, they’re like, Well, what are the contingencies? Is there a financing contingency? Is there an inspection contingency? Right? There’s always contingencies. Sure, sure. I really liked this definition. Please, please, typed in contingency and the Oxford Dictionary said, a future event, which is possible, but cannot be predicted with certainty? Well, that’s true, that is the most true,
Katy 2:45
they might get a loan,
Alissa 2:47
they might get a loan, they might sell their house, they might make it pass inspections, to pray, right, it might happen. What other contingencies, you know, like a future event is the future event which is the closing is all dependent. But it cannot be predicted with certainty hard to say. That’s hilarious, hard to say. So today, we’re going to be talking about navigating contingent contracts. When you are have a buyer that needs to sell their house
Katy 3:19
buyer is selling a house before they must sell the house or property before they can buy. Yes, that’s what we’re focused on. If you consider contingencies, any of those other things, inspection appraisal, you financing, that’s not what we’re talking about. Right? Okay, now, we have an episode number 65. That actually covers buying and selling at the same time, it is incredibly packed with information about how a buyer would do
Alissa 3:50
that. And we also did it as if you were speaking to the buyer client. Right? So you could share that episode. Yes. So if you have a client that needs to buy and sell at the same time, that would be an amazing resource to share with them because it will walk them through all the things they need to think about to plan their move. And it was recorded that way. Yes. So that it can be a tool for you to use in your business.
Katy 4:15
So if you run across someone who’s like, well, I don’t know I have to sell to buy and I don’t even know how to do that. Yeah, I can just go on over to Episode 65.
Alissa 4:23
That was a long time ago. It was
Katy 4:25
it was a minute we’re on to 18 Wow.
Alissa 4:28
It really doesn’t seem like that old.
Katy 4:30
No, it was there was a bit bit ago. Okay. Where do we want to start? Where do you even want to start on your blank page?
Alissa 4:38
i Okay, I’m ready.
Katy 4:40
I have one, two, okay, fine. You can go first if you want. You’re the
Alissa 4:44
listing agent. Okay. You get an offer. And it is contingent on the sale of the buyers home. What happens next?
Katy 4:53
Okay, great minds. Let me go first, then we’re gonna come back to you. Because I want to preface all of this by saying a lot of agents who got their license in the last couple of years maybe end of 2019 on is dependent on your market contingent offers were not even a thing because the markets so busy, right? Yeah. Because multiple offers, most sellers are not going to even consider waiting on you to sell your house. Right. So I think that this may be a topic that’s coming. We got several requests for this.
Alissa 5:27
And I think it’s because the market has shifted. Yes. And we are starting to see contingency offers make a comeback? Yes.
Katy 5:33
Okay. Now you can now answer your question. Okay. I’m ready. So I am the listing agent and I have received a contingent offer. Yeah, honestly, my hope. And my hope for our listeners is that the buyer’s agent prior to spending all the time writing the offer would make the phone call text email to me to say, will your seller consider a contingent offer because let’s all not spend our spinner wheels here. If it’s not on the table, for instance, I have a RELO listing right now, who has an interested buyer, but they are contingent, and the real company does not allow that unless that house is already under contract.
Alissa 6:12
Relocation will not accept contingent offers. So okay, unless it’s pending. Let’s
Katy 6:17
just say the buyer’s agent did not call me first. Okay. I’m annoyed. Sure. But I am going to proceed. Go to my seller. And you know, sometimes sellers say no. And then when you see it in paper, on paper, it’s different. They’re like, well, we don’t have anything else. Yeah. Here are the questions. One, is their house listed? How long has it been listed for? You know, so if it’s not listed at all, this is one thing. If it’s listed, but it’s just been listed, and it’s getting, I’m gonna have to talk to the agent, what is the activity that you’re getting? Have you gotten any offers? How many days on the market? Is it what is the CMA the Market Report for that neighborhood? Like, I need to try and figure out how quickly is this house going to sell? How likely will it sell? What is the current sales price? Did you price it over? Where it should be? Like, I need a market report for the house? And all the information if it’s not listed at all, yet? This is a hard no for me. I would agree. It’s very hard to know. And it’s hard. You don’t know what the pictures look like, got nothing. Got nothing. Now, the only way I can maybe make it through this and be like, okay, possibly. But if I’m advising my seller, I’m like, Look, their house isn’t listed. We don’t know what condition it’s in what price is going to be? What? Look if we have nothing else going on? And we’re like, okay, but we really want to try and make this work which, okay. I’m going to need the Market Report. Yes, I’m going to need to know what they plan to price it at. What the condition is, like, is the listing is the agent presenting this offer listing it if they’re planning to list it for sale by owner? We’re back to hard no. Right? Okay, so there’s so many pieces and parts to this. So I’ve asked, let’s just say the buyer’s agent has said, Okay, no, I’m the listing agent. Here’s the Market Report. We’re pricing it this I feel like it’s at or below market price. And so I’m like, Okay, it’s in good condition I’ve seen with my own eyes, our photos are scheduled for tomorrow, or we’ve already got photos ready to go. We just didn’t want to list yet. Then maybe we can take this non listed, contingent offer. Sure. But you might want to counter a term or two, right?
Alissa 8:32
Yes. And, you know, even specifying like, if it’s one that’s not on the market yet, we’ve had people counter saying home to be listed in the MLS within seven days of acceptance of this contract
Katy 8:47
had had I’ve responded and have it done to me listed by our licensed it’s religion, yeah, into the
Alissa 8:53
MLS, because then next thing you know, it pops up as for sale on for sale by owner with iPhone photos, and it’s priced wrong. And it’s just not a good situation.
Katy 9:02
Okay, because I think what I have to advise my seller is listen, we’re not putting this house pending, you can still show it, you can still have other buyers come in, you could still receive other offers and take them and then pull the pull up the first right of refusal on the first offer, basically say you’ve got to remove your contingency. But there are some group of buyers that are not going to look at a contingent house. Yeah, specifically, other contingent buyers. Yeah. And if you’re in a neighborhood, so you kind of have to be aware of your market. Are you in a price point that a lot of move up buyers move to this neighborhood? Well, maybe if you get one contingent offer, we can kind of assume you’re gonna get another like, do we think all of your offers might be contingent? Well, this contingent offer not listed at all, is much inferior to one who shows up it’s like we got our house under contract today. Yeah. And I can’t take another contingent offer. If I’m stuck with this first contingent offer. Are sure, I feel like this is hard. It is all in my head.
Alissa 10:03
Shall I give an example go, please. Now this one doesn’t have a happy ending cheese with these. Lately, I’ve been having a rough time. Let’s hear it though, maybe
Katy 10:13
it’ll walk us through the parts.
Alissa 10:15
I have an amazing house listed, like 750,000. It’s gorgeous. The sellers are just a delight, and they have kept it. So it’s the house you want to buy, especially if you’re picky. Okay, it’s immaculate. Okay. Um, there was something about the floor plan that we were getting some feedback for. And I think that, you know, the market has shifted, and we’re in sort of a slower time. And this is a luxury home for our market. Okay. So we got off to a little bit of a slow start. And we got an offer that was contingent on the sale of the buyers home. Great. It was on the market. And it was delivered beautifully. Like they gave me all the information I needed when they sent the offer. Okay, it was $350,000. The photos were great. He explained to me why this house was so great. What’s different about it. And I just thought I feel like this house would sell before ours. Okay, so if that one can sell then ours can sell. Right? So I did counter because they did not want to have inspections immediately. They wanted to wait until their house was under contract, they didn’t want to put any money out before having inspections. And I countered that. And the agent called me and said they, they specifically asked him to put that in there, because they had made an offer on another house and had inspections and paid the money. And then someone came along non contingent was not contingent, and basically stole the house from them like them. So they were like, we’re not doing that again, we already lost money. So I talked to my sellers. And I said it’s not that they don’t want to put out the money. It’s just that they have before. And then they got burned. And my sellers are like a delight and so kind and they did they agreed. So we agreed. Okay. I think here’s a good time to pause. Okay, great. Why? Because I like to explain to my buyers just to be sure, like, if we are making a house a offer on a house contingent on the sale of your house, and somebody comes along, that doesn’t have a house to sell, and wants to make an offer that the seller will accept. We’re pretty much out unless you can remove your contingencies and purchase the home. So the way it works here in our marketplace is you have a certain amount of time to make a decision as a buyer, once you have been notified that the seller has received an offer that they would like to accept, correct. Okay, that’s either in our market 48 or 72 hours, usually, typically, you can put whatever you want. So I always tell my contingent buyers, we need to be ready for that moment, because making a decision and 2448 hours is not fun. So we already know what we’re going to do in that situation. Because I have already my buyers have already talked to the mortgage lender figured out if they qualify for both notes talked about a HELOC option talked about a one time recast? Are they going to be able to remove a content when we do it? And do we feel comfortable doing okay, so that when we are notified, we know if the answer is yes. Or if the answer is no. Right? So we have all that figured out we’re not trying to figure all of that out quickly, right in a moment of panic. Yeah. So I think that’s an important thing as a realtor. And I know some realtors have trouble getting heavily involved in their buyers finances, right? But this particular situation, you have to know what the answer is going to be in order to serve them. We also had a newer agent that didn’t realize they thought every time you got an offer, you had to notify the other party that you’re contingent with if you’re the listing agent. So like if I’m the listing agent, and we have an offer contingent on the sale of the buyers home and I get another offer from you, but it’s not contingent, but it’s a terrible offer. Yeah, I
Katy 14:39
don’t need to let the contingent people No, no, no, but people think
Alissa 14:43
oh, we’re gonna counter you I need to let them know. No, you in our market. You don’t have to let the under contract contingent buyers know that somebody else came along and maybe y’all countered back and forth. Yeah, but it never came to fruition. The other part of this is
Katy 15:03
if the other the buyer is making an offer, that’s better than the contingent offer in your want to take it and you go back to the contingent offer that was already in place, and they remove the contingency. You can’t get them to pay the extra. No, it’s just whatever they had it under contract they get to continue along and buy.
Alissa 15:24
Yes. So in this situation, if we were under contract for $750,000, but then I got an offer for $765,000. Of course, we want to accept it. But first, I have to go notify these contingent buyers. Hey, we’ve received another offer. Can you remove your contingency? Or do you have to cancel? And they say, No, we’ll remove our contingency. We have our finance backup plan. Yeah, you don’t get to get that 765 off. Oh, it’s just gone. You are now under contract for $750,000. As you were as you were before, as you were before,
Katy 16:06
okay. You want to finish your story? So we haven’t gotten to the sad ending yet?
Alissa 16:14
No. So we agreed we pretty much agreed our whole way through this thing. transaction, you were very agreeable. We were very agreeable, very easy to work with.
Katy 16:27
So they didn’t have to do their inspection in the beginning, right? You get it under contingent contract? Yes,
Alissa 16:31
we are. Now instead of a for active we are. See for contingent in the MLS in the MLS. We had one showing during the like 90 days that we can send to this engine. Okay. So I feel like that’s slowed you down. It slowed us down for sure. Okay. I also during that time updated the realtor remarks and the public remarks, okay. And the showing time remarks everywhere to just say, please continue to show the property the buyers home is not under contract. And we are open to accepting other non contingent offers.
Katy 17:11
Here’s my question, especially in that price range. Is it a possibility that you lost a buyer that would have also been a contingent buyer? Sure, because you were only able for 90 days to show it to non contingent buyers. Absolutely. Right. Yeah. Okay, well, how does this wrap up?
Alissa 17:29
So it’s slow, we are approaching the end of our contract timeframe and their house has not sold. Okay. They are stressing and doing everything they can. And we agreed to give them an extension. Because they were having a lot of activity, they really were a lot of activity on their house, and felt like an offer was coming any day now. Okay. So they actually shortly after our extension, get their house under contract, like, yes, it’s working, it’s happening. And they proceed with inspections on our house, they have inspections on their house that they’re selling, everything goes mostly fine. I mean, we had to negotiate a few things, but they certainly There certainly wasn’t anything deal breaker for sure.
Katy 18:22
I don’t know the end of this. I’m on the edge of my seat.
Alissa 18:25
So we’re in the middle of negotiations, and I’m trying to understand why the buyers are being so difficult about all of a sudden inspection, bouncy inspections, okay. We agreed to like almost more than they wanted. Okay. We could not check the box that said, everything, everything. But we went above and beyond the one item that was actually just not possible for us to do with a significant amount of money for what the item was. It was so stupid anyways. It they sent us a cancellation out of kind of nowhere. And I’m like, really upset. The buyer’s agent is upset and embarrassed and frustrated and all of that. I’m like what happened? Like, what happened? Yeah, I did not get answers at that time. Okay, I found out after the fact that pretty much what happened is they basically said to each other, hey, we’ve been, you know, waiting on our house to sell so long. Maybe we should see if anything new has come up in the last 90 days before we tie ourselves down to this house we’ve been under contract on. Maybe we should take one last look at the market and see if there’s any new houses that have popped up that we might like better because we are now in our 10 Day inspection period where we have one last chance It’s to make a decision. And they found something better. And they were under contract the next day on a house that was very similar to ours, but a little bit newer.
Katy 20:12
And the lesson we have learned here is that the next time somebody wants your seller to be nice and allow them to wait on the inspection, you’re gonna say, No, and do
Alissa 20:22
I used to be nice, I
Katy 20:23
see, let me tell you a story.
Alissa 20:25
I’m not nice anymore. And, like, my sellers are really nice people. And they’re what I told them you all, from a business standpoint, this maybe isn’t what I would advise to do, I wouldn’t advise an extension, but they were just really nice people and the buyers at that time, were giving us really nice updates constantly. And, ya know, looking back, I would have done it differently. Yeah, um, but it’s also just one of those houses that we had someone and we were just trying to keep them this is exactly
Katy 20:59
remember the story of my big listing that was on the market for four years, one of which pending the whole time, oh, my god, extended, extended, extended, because you’re like, if you don’t have anything, and you have something you kind of don’t want to let it go. Right. That is a really hard situation. It was just really sad. And I was just so upset about it, like it’s still on the market. And I think this would be a Yeah, it’s still in the market.
Alissa 21:27
I think it’s a good opportunity to remember that as realtors, when you are helping a buyer who is a contingent buyer, once they are under contract on a home, we need to stop looking for sure. Like once you are under contract, this is your next house, we are just waiting on your house to sell right we’re not going to I’m gonna it would be a good time to shut off any automated thing that you’re sending out don’t accidentally send them new listings, new lists. Yes. And you know, it’s like, if that’s the way you’re going to do, if that’s the way you want to do it, then you need to sell your house, live with family or rent so that you can be a buyer that can make a non contingent
Katy 22:13
offer, right? You’re asking a lot as a buyer, you’re asking a lot of a seller and a lot of faith from a seller. And you’re you’re putting a lot of risk on that seller,
Alissa 22:22
a lot of risks. My sellers had moved out. I mean, the whole deal, it was just and I left it contingent for like a week after the cancellation because we weren’t getting the house cleaned from the mover. Like I just wasn’t ready to put it back active. I had to get new photos taken all these things again. So it was just like a really eye opening situation with a very difficult buyer who I did not that’s the thing, too. I didn’t, there were no red flags, there were no red flags about the buyer know, until until their home got under contract. Right. And then all of a sudden, they were extremely difficult
Katy 23:13
to you know, what I will say? Because I’ve learned the same lesson the hard way. I just kind of learned to tell myself, you know what, I can’t do a 90 day contingency. I can’t like, if they want the house and we’re still on the market in 60 days, they can come back. But if I take it off the market completely. I’m missing out on someone who could come and ultimately the goal is for you to sell your list the sellers house as much as you’re like, oh, right now it looks good. Let’s try and make this work. It is kind of hard. But you can always go back and follow up with them again, Hey, how’s the movement on their house? I have definitely had that happen before where my seller was like, No, I’m not taking this contingency. But I knew that the buyer put their house on the market. And I just kept following up and I I don’t know that I’ve ever got one to turn. But they they do still want the house. So yeah, if they get under contract, they come back. Right. They could come back like you don’t have to. And that’s what I kept. Like, if it really was the house for you, you would come back. Yeah. You know, if you love something, set it free. And if it comes back to you, it is yours. It doesn’t it never was Oh, my guess so it’s just the same. This is the psychology of real estate though. Right. And
Alissa 24:27
it was just like it wasn’t the buyer’s agents fault.
Katy 24:31
No, I’m sure they would prefer them to just move forward with the house that had already been inspected or
Alissa 24:36
percent. I mean, they were they were devastated to make that phone call. It’s embarrassing. I would have been humiliated,
Katy 24:44
for sure. All right. There was no way to really avoid that on your own except for not extended out. Okay. Well, let’s talk about this. That’s my question. Then from there. What is your normal amount of time that you think you would accept as a contingency as the listing age? But like, you wouldn’t have taken a 90 degree 90 Day contingent from the beginning. No, you just extended to there based
Alissa 25:06
on their activity and how well the communication had been going, what do
Katy 25:10
you normally recommend your sellers to do for time? I feel like 60 days, that’s normally what I would do if we’re gonna take a contingent let’s do 60. But I’ve done slightly shorter, depending again, on where’s their house? When are they listing it? What like, what do we expect it to, to happen with that house? If it’s going to sell quickly? Then maybe a 45? Day contingent is all we need they because let’s assume all transactions take 30 days, right? Okay. If you do a 60 a contingency they’ve got 30 days to sell their house, and 30 days to close both houses, right? Yeah. Here’s where the other problem comes in on the timing. When you say we’ll take your contingency for 60 days, and they don’t have their house under contract after day 31. What do you really think is gonna happen
Alissa 25:58
sort of in just a waiting game, that’s the period of time or the contract to it that
Katy 26:03
I hate because legally, you’re in contract, you can’t go take another contingent contract. You can’t put it back on the market. But I do think you can avoid this with some wording in the original offer.
Alissa 26:14
I had a good one, let’s say recently, it was another agent that countered my buyers were the contingent buyer. Okay. The agent sent me a counteroffer. And at first I was like, Oh, I like that. Because it threw me off at first because I saw that they had countered for the close date to be like, August 28. And I was like, well, it’s like, July 15. So we have 10 days to get the house under contract. And close, but they had written in there that buyer to have their home under contract by this date. Okay. The 28th. Okay, August 28. In the event that the buyer receives a contract before the expiration, seller agrees to extend the closing no more than 30 days. Okay. So it sort of put a hard stop on the contract, right? So you’re not in limbo for 60 days, right. But if you got a contract, and you were really pending, we’ll give you an extension. Yeah.
Katy 27:25
And there’s a lot of ways you could say that in the additional terms. Yeah, that’s the thing.
Alissa 27:29
You can say whatever you want, as long as all parties sign off on it, you can you can make it how you want it. And I actually really liked that. Yeah. Because it worked. We ended up that this is a hobby story. Oh, it works out have a happy story, baby. You are the buyer’s agent, right. That’s where the problems happen. Right. And so we got their house under contract, and I love it. We didn’t even have to do an extension for perfect.
Katy 27:57
So I think that yeah, in your terms, you want to basically say, What happens if their house isn’t under contract by x? Because the last thing you want to do is lock up that listing for 30 more days waiting for a closing we know isn’t going to happen, right? You’re just waiting because of the way the contract is written legally. You can’t just say, Oh, well, your house isn’t under contract, because you know what they could counter? Well, a cash buyer could come tomorrow, right? So you got to really think that through, right? That’s the thing with contingent offers, you got to think them all the way through to the end. Like, what’s the timing? How’s this gonna work out? Okay. What do you do Elissa Jenkins? If you get an offer on your listing, and the buyer is contingent, but their home is already under contract?
Alissa 28:43
Oh, I think that’s great. Oh, now what do you do? It’d be nice. I do ask to see a copy of their contract. I like to know who’s working all the side that plays a factor. I like to know how far they are. Are they pass inspections, when our inspections I want to make sure that the right people are going to be at the inspections you will attend with your buyer. And then, yeah, I mean, I just make sure the contract is solid. Anything else? Do you
Katy 29:14
then have to also do your normal lender calls to the lender of that transaction? Right? So I’m checking all the lenders my note here said you’re now babysitting to transaction Yes, you gotta make sure your people are all doing the right thing and that those people are all doing the right thing because you’re really at the mercy of the domino one domino number one, and I’ve been in a lot of dominoes. I’ve been into dominoes 345 all kinds. Okay, so you gotta you gotta know what’s up with that deal. Who that lender is what’s happening. Now, here’s the tricky question. What if the contingent house isn’t in your market? Oh, that is hard. But let’s just say it’s not under contract yet because that’s the same process. If it’s under contract, you can check with the lender check with see where they’re at fine. What if it’s not under contract yet in their house? Their selling is a different market?
Alissa 30:04
I’ve certainly had this happen. And I have researched the realtor, I have checked to see if they’re full time. Are they a full time agent? Do they actually sell homes? Are they familiar with transaction? Good questions, all good questions. So it’s when it’s an out of state deal, I really have to trust the realtor.
Katy 30:29
I’ve had the problem where so it’s out of state, the buyer’s agent is not the agent of the listing. Right? I’ve had trouble getting the buyer’s agent to get me what I needed from the listing agent like, well, I need a market report for that house. How long? Do they think it’s going to be on the market? You know, have they had any showings or offers? And where are we at in this process? What’s the market like there? I mean, it’s kind of hard because you’re really needing to ask that agent to the go get through them for or you’re gonna have to just skip over them.
Alissa 30:57
And people think, Oh, I can’t email the lender, because they can’t give out personal financial information, so many things that can answer so many that you’re not asking for their credit score. No, you’re asking on, I’m asking for the lenders level of confidence on this transaction coming to closing. Yeah, an active sale.
Katy 31:16
I think we caught my questions on if the house is not listed yet. And we have to ask them about the price. So I think we’re all good here. All right. We’ve talked about this a little. If you have a contingent offer, you’re not gonna be able to take another contingent offer. If you’re right, if you’re in an area where you think that most of your buyers would be contingent, you want to make sure the first one you choose. You could it honestly, you could end up in a multiple offer contingent offer situation? Yeah, it’s possible, you want to take the best contingencies. So the best contingency would be one that is already listed under contract, ideally, far in the process, right? Done with their inspection, maybe done with their appraisal, somewhere farther along, you want to be able to talk to the lender and make sure that that loan looks good. And then you be great. Now, here’s my next question point for you that you need to expound upon for our people. When can a buyer remove a contingency? Let’s say their home is under contract? When can they remove the contingency from this, what they’re purchasing,
Alissa 32:25
they can remove their contingency when they close on their home? Right. So I just had a different situation where I had the buyer, and we were contingent on the sale of their home. And the listing agent was not super familiar with how contingencies work. So I bested him to let him know, hey, we’re officially under contract, here’s a copy of the contract. Everything is look, this was your buyer, my buyer. Okay. So I said, you know, we’re great news looks like we’ll be able to make our close date. So he said, like, great, let me know when you can remove the contingency. So I didn’t really understand the question. I just sort of was like, Okay. And then when we finished inspections, I said, Hey, I just want to let you know, we’re done with the inspection period of my buyers house. So everything is still looking good. You can tell your seller to start packing. He’s like, great. Did you ever send me the contingency removal? I said, No, we’re still contingent. Well, at what point can you remove the contingency? And I said, well, in three weeks, we’re going to close the buyers home at 9am. And then at 10am, they’re going to purchase your client’s home. So I guess for the 10 minutes in between those two transactions, the contingency can be removed. And he was like what? I said, Yeah, as long as they own the home and it hasn’t closed yet. They’re still contingent on that sale. We’re still contingent, I can’t remove the contingency. So I guess that is when the contingency would be removed when they no longer own it. And he was like, I never thought about it that way. I said, Well, what if we remove the contingency, and the buyer loses his job the day before? Close? Yeah, we’re still very much considered contingent. What was the definition? It is still very uncertain.
Katy 34:29
And we don’t know the outcome. We don’t know the outcome yet. Not Yeah, I’m
Alissa 34:32
feeling good about it. Right. But we’re still a contingency. So
Katy 34:35
the only way that you could remove that contingency is that the lender said, You’re approved to have two mortgages Yes, because you can’t have if they’re not approved to have two mortgages, they are contingent until the first mortgage is gone.
Alissa 34:49
I think that’s a great point, too, that you bring up because I have had situations that ended badly when I was the listing agent. Okay. We accepted a contingent contract, hey, we received a better offer while we were contingent. So I go to the buyer’s agent. And I say, Listen, we have received another offer, we would like to accept your 48 hours to let me know if you can buy this house or not without selling your house begins. Yep. They said we can remove our contingency. Okay, they can’t.
Katy 35:27
Because they just thought they were under contract on their house.
Alissa 35:29
They were Yes. They thought that they wouldn’t be able to. They were gambling. They were they had gotten their house under contract. Okay. But it was still in the very early stages. And they were just gonna pray that you didn’t get another offer that if they remove their contingency, because they did they didn’t want to lose my listing. Right. Right.
Katy 35:57
Right. But they were gonna say they weren’t. They did. And they were
Alissa 36:00
so I notified them. I said, 48 hours. Okay. I would like to accept this other offer on behalf of the sellers. Right. But I need to hear from you if you can buy this house or not. And they just said we can. So you know how I ended up finding out because you went to the lender? Letter? Yes. Yeah. So what happened is, I went back, but I did have a little bit of error, because they the buyer’s agents said, my buyers have let me know they can proceed with purchasing your home, I’ll send over the contingency removal. So I immediately call my sellers, I’m like, hey, they can proceed with the purchase of your home. So they’re going to remove their contingency. So I had to go back to the better offer and say, I’m so sorry, the buyers were able to remove their contingencies, okay. The next day, I emailed the lender, like a copy of everything, and was like, keep in mind, I am the listing agent. The buyer’s agent should have done the same thing. Yeah, it was news to her that they were lying. Yikes. I emailed the lender a copy of the contract and said, okay, the buyers have removed their contingency. We’re good for closing. And she basically said, how did they do that? And I said, so they can’t have to mortgage like they can’t. They want to the lender said they 100% still have to sell their house to buy this one.
Katy 37:31
Did you get to go back to the other buyer. They were still they were there.
Alissa 37:35
It worked out. But what and I don’t know how it would have played out? What if they have a chance that if I the listing agent had not reached out to the mortgage 100%. And we would have just done a back to back closing. But you’d never know I would have never known if everything went perfect. It’s when it goes wrong,
Katy 37:57
it goes so wrong. And then it would been on you that you didn’t follow up
Alissa 38:01
with the lender. Absolutely. So if I would have never followed up with the lender to say, hey, lender, we are moving forward. This is no longer a contingent contract. Let me know how things are going.
Katy 38:15
This is why you need proof. Every part of every if it’s a cash offer proof of funds, if it’s a if it’s a lender, we need a pre approval, like you cannot just take someone’s look, the agent didn’t even know she was lying. No,
Alissa 38:32
she just believed her clients. The buyer’s agent never even checked in with the mortgage lender.
Katy 38:38
I had a checked in like, way long time ago. That’s the thing
Alissa 38:41
I make my clients know the answer to this that we all know the answer to this question before you start before we even make an offer on anything. Yeah, we already know. She just was like my buyers told me they could buy it. I just believe them. I’m like you had no communication with their mortgage lender? Well, no, that’s their business. It is oh, all of our business, all of our business. So let’s let’s play it the other way. Let’s say I had not reached out to the mortgage lender, and we’re approaching closing and something happens on the buyers house. Yeah, they’re unsold their buyer dies. Yes. And now I’m like, But wait, why does that matter?
Katy 39:20
Yes. Guess what? Your seller is already ready to buy something else? Yes. And Domino. Yes, Domino.
Alissa 39:27
And so I would have been very confused why their sale falling through impacted us at all because you have removed your contingency. Yeah, so if your sale falls through, that doesn’t matter. Because you’re not contingent on that breach of contract, it would be in breach of contract.
Katy 39:46
And your seller could have sued them
Alissa 39:49
and kept their deposit and all the other things. Yeah. Luckily I caught it early, but I was just so it was such a reminder To me how I just assume everybody runs business the way we do can. And unfortunately, I’m beginning to be reminded every day that they don’t. More than I would like to be reminded that agents are not involved in the process, right? I am reminded way too often. And so I think this is such a reminder that as the real estate professional, we need to be involved in every aspect of the transaction, from pre approval to financing to plans a, b, and c to inspections to appraisal to everything. Yeah.
Katy 40:37
And at the risk of hurting an agent’s feelings, you still have to micromanage the other side.
Alissa 40:43
And you can micromanage gracefully, kindly. Yes. Always.
Katy 40:49
Okay. I want to now talk to you about the contingency form that we have the standard one in our, you know, board docs, and we have a few floating around. There was one for many years, it was kind of like it was a contingency addendum. So if I wrote an offer, I had to attach the addendum right. And the addendum was kind of a one page, hey, this is the house address we’re selling, we have to sell it to buy your house, we’re asking for 72 hours, you put in the blank 48 hours first right of refusal to remove the contingency. If you get an offer, you want to accept that it’s not contingent. The end. All right. Now, there is a version of the form that as a buyer’s agent, I really like it too. But as a listing agent, I don’t love why, because it asks for you to put the house pending in the MLS, if their house is under contract. So I
Alissa 41:40
have been countering that. Well, when I have the buyer, I have been saying that once both houses are passed inspection, we will be placed pending. As long as we are in that fragile 10 Day inspection period on either house. No one’s going pending. So that’s sort of how I have been writing it in the addition you have to fix
Katy 42:02
it. It’s not how it’s written. Okay. I think the way the addendum is written now is like, Hi, I’m a buyer, I’m buying your house, this is the house I have to sell it is already under contract. We are asking you to put our the listing we’re purchasing from you pending in the system. And
Alissa 42:20
the and it makes sense that they want the house they’re buying pending, because they don’t want to be sniped. And they’re pending because they don’t want to be homeless at home. That’s what I’m saying.
Katy 42:29
I as a buyer’s agent, I am for it. Yes, because I don’t want my buyers to get sniped while they’re trying to sell their home that’s already under contract. You’re you’re gonna end up homeless. Sure. But as a listing agent, I don’t really want to tie down my listing to a pending status where it can’t even be shown, right. That’s not ideal. No. So you’re you’re basically countering the term. But yes, it’s in the form then has a second section that’s like, you know, we’re selling a house at this address. It’s not on the market yet. But it’ll be on the market. I think it says how long or there’s different, like different scenarios, yes, scenario, A, B, C, whatever. So just look at the forms in your area, yes, or what your office uses.
Alissa 43:11
And if you have a problem with your forms, join a local committee.
Katy 43:16
You’ve been on that committee that year,
Alissa 43:18
I’m on that committee telling them how to fix the forms. We need agents that do transactions in order for don’t know where the flaws are in these forms. This is what happened. And this is because yes, yeah. Yes,
Katy 43:30
I agree. Any other important thoughts about pending, I mean, contingent, I feel like
Alissa 43:38
this is a lot of technical information. I think it’s okay, that it’s a little bit of a shorter episode. Super
Katy 43:44
situational. Yes, there are a lot of questions you need to ask as the listing agent, there are probably just as many questions you should ask as the buyer’s agent. Ultimately, you cannot be afraid to discuss the budget the financing the money with your buyer, because you’re gonna have to know Are you able to remove this? Is it just that you don’t want to be? You know, pin, like, you could remove the contingency? if push came to shove? Can you be homeless? Where will you go? Like, we have to walk through all the scenarios? Yeah, there are a lot of moving parts to being a contingent buyer. It can be done. I think the problem is that agents now we’re like, well, we’ve always just said no, because, yeah, we market had other options. But now that the market is slower, you need to think through. Even in a slow market, like you just did, you cannot have your listing off the market for 90 days, praying that the contingent buyer figures out how to sell their house. There’s got to be some like, Look, if it doesn’t happen in the first 30 days, you’re welcome to come back later when it happens for you. We might still be here, but we can’t be off the market that long. Right. You know, my seller cannot choose to not market their property for that much time. Yeah. I mean, it’s hard.
Alissa 44:57
Yeah, it is hard. I was gonna get into like, if you are buying and selling at the same time. And there’s that window where you have to be totally out of your house. But you can’t move into the new house yet, because you haven’t bought it yet, because you’re doing that within the same hour. That’s a very difficult transition period. And we really deep dive into that in episode 65. Yeah, because
Katy 45:20
as an agent, it is your responsibility to explain to your buyer how the logistics work, they don’t I’ve had other agents be like, Okay, well, the buyer needs to get in three days before closing so they can get out of their other house they’re selling. I’m like, that’s not how this works. You would have had to negotiate that in the beginning. Yeah. So there are a lot of parts to the actual move that are important. There’s all of the financing parts that are so important. I, you really better be vigilant. And it doesn’t mean it cannot be done.
Alissa 45:52
You just have to be really good at following up. Yeah. And communicating with all the parties. But
Katy 45:58
I also think this is why buyers are afraid to get in in the market right now. Because agents don’t understand how this works. Right? So if you’re able to explain to the buyer, this is how it works. You don’t have to I’m not gonna let you be homeless. Here’s the ways we’re going to deal with that. It can be done. Yeah. And then you get to transactions. I know. And I think that there are a lot of buyers who would be out in the market right now if they had agents explaining to them how it was done. Right, and that they can do it. Yes. And other problem is that the low inventory means the buyers that are even willing to do it are afraid to list their house because they don’t want to not be able to find a house and again, we’re back to the homeless problem. But why don’t agents ever say to their their sellers? No worries, if you get an offer, it can be contingent on you finding something right. You’re there is literally a way to work through any problem contractually. But you got to talk to your, your sellers and your buyers about that first. Yeah. Man,
Alissa 46:56
these are not conversations you want to be having on the fly after you looked at houses or you’ve looked at houses. This is especially you know, we preach, you need to have the buyer consultation, especially if they are going to be a contingent buyer. Yeah.
Katy 47:10
Also, when do you take photos? If you’re going out with a buyer? When do you Alyssa take photos on their house
Alissa 47:15
that’s going to be listed? Usually before we start looking at houses, right? Yeah. Isn’t it better
Katy 47:21
to be able to tell the agent of the listing that you want to write an offer on contingent? Hey, don’t worry. We already have photos. I think it starts showing tomorrow they can start showing. Yeah, that’s a big difference between Oh, well, they gotta get cleaned up and ready. And we’ll get photos next week. That’s a whole week. Yeah. Of your marketing period. No.
Alissa 47:39
Yeah. Okay, thanks. Just to think about this was good.
Katy 47:43
It can totally be done. But we all have to be very highly educated on the system. How does it work? Where you are? What are your forms? What do you need to tell your buyers? What do you need to tell your sellers and
Alissa 47:53
having them all at the same title company? Oh, my gosh, yeah. And nothing is worse than a contingency when closing it to different title companies and you’re having to deal with getting the funds from the sale of the home to the funds of the purchase of the home. Large amounts of money being wired in a short timeframe. It’s it’s no good.
Katy 48:12
Do not kid yourselves. Your job is logistics. Yes. As a realtor, your job is logistics. It isn’t home searching. They can find them online. It is literally logistics. How do we get through from finding house to actually owning that house and living there? And not spending any days homeless? Right. These are important things.
Alissa 48:33
So is that all you have on contingencies is I think that was a thing that was good to be a short one. Okay, great.
Katy 48:39
We are going to do our tests now. Are you ready? This is from Galena, Vaynerchuk. I’m going to say thank you to Galena for giving us the pronunciation of who she’s toasting to, but I probably needed it for her. Hopefully that’s right. She is toasting to cat dog and they are in Kalispell, Montana, Montana, Montana. All right, galena says, Here’s a toast to cat a remarkable realtor who has truly gone above and beyond for me as a new agent. From the very beginning cat has been an excellent mentor, offering guidance and support whenever I needed it most. I am particularly grateful for her ability to strike the perfect balance between tough love and gentle encouragement. Oh, I hope that’s what we do here. Yeah, I
Alissa 49:24
feel like we’re a good balance. She
Katy 49:25
always knows just when to push me to do better while also providing the comfort and reassurance I need to feel confident in my abilities. So here’s to cat a true professional and an exceptional human being. Thank you for everything you have done for me and for setting such a high standard for what it means to be a great realtor that you write so well. I know right? You intimidate me and inspire me all at the same time. Okay, so cheers to laugh, and thank you to Galena and I mean, what a great toast. Yeah, I know they are really good writers.
Alissa 49:58
I thought about something for contingencies, no, keep going. Are you great writers? I’m sorry, Dale just have to edit that out.
Katy 50:05
What do you want to say it on the cable? Sorry. You don’t get to hear this by.
Alissa 50:12
Sorry. Thank you so much for tuning in to the hustle humbly podcast.
Katy 50:15
If you enjoyed this episode, please go to rate this podcast.com/hustle humbly and leave us a review or drop a comment if you’re listening on Spotify.
Alissa 50:24
If you have an episode topic or someone you’d like to toast on the show, please email us at team at hustle humbly podcast.com
Katy 50:31
Find us on social media at hustle humbly podcast. Don’t forget to find all of the free resources at hustle humbly podcast.com/resources See you next week. This is the goodbye
